Thai banks are set to demonstrate resilience performance from 1Q26 financial reports as they navigate a challenging macroeconomic environment in 2026, according to Morgan Stanley’s latest note. The firm highlights slowing GDP growth for the country, now forecast at 1.5% for 2026 (down from a previous 2.0%), with Thailand particularly exposed to ongoing energy shocks due to its oil and gas trade deficits.
Morgan Stanley considers success for Thai banks in 2026 to mean maintaining robust asset quality, preserving capital, and delivering consistent dividends—emphasizing selective quality plays over broad sector exposure.
Among the sector’s leading names:
- Bangkok Bank (BBL) is seen as the most defensive option, owing to its resilient net interest margin (NIM) and exposure to top-tier corporates and growth in Indonesia. However, it faces downside risks from interest rate sensitivity and net interest income (NII) pressures.
- Krung Thai Bank (KTB) offers the highest yield and strong return on equity (9-10%), with defensive asset quality. Its valuation is considered fair, bolstered by solid capital buffers, though loan growth and margin pressure are downside risks.
- Siam Commercial Bank (SCB) and Kasikornbank (KBank) provide exposure if oil prices fall, but their risk/reward profiles are seen as more balanced. SCB’s valuation is notably full at 11x P/E and faces structural headwinds, while KBank’s fee growth and dividend support balance the risks from lower rates.
- TMBThanachart Bank (TTB) is viewed as most exposed to risk, given its higher valuation and heavy retail portfolio. While self-help initiatives are a positive, weak growth remains a key concern.
Thai banks overall maintain strong Common Equity Tier 1 (CET1) ratios of 17-18%, with significant buffers allowing for at least two years of resilience even under elevated credit cost stress.
In the 1Q26 preview, Morgan Stanley expects a mixed quarter-on-quarter performance, with margins squeezed by rate cuts and slow loan growth. Asset quality should remain manageable in the near term, thanks to robust non-performing loan (NPL) coverage and provisioning.
Net profit after tax estimates for FY2026-28 have been revised lower for BBL (up to -15%), SCB (-5.5% to -8%), KTB (-3.6% to -12.3%), and TTB (-2.8% to -10.3%), while KBank’s outlook remains largely steady.
Valuation Snapshots:
- BBL: Target price Bt201.00
- KBank: Target price Bt197.10
- SCB: Target price Bt136.00
- KTB: Target price Bt23.80
- TTB: Target price Bt1.69
